Thursday, January 3, 2013

Why do many innovations fail? It is a question that baffles the best of us and keeps many a corporate executive awake at night. This anxiety is not unwarranted. Despite having a brilliant idea based on true customer insight and needs implemented with flawless execution, many innovations simply fail to meet the expectations set of them by their creators and by the market for which they were created. The Wide Lens by Ron Adner is a must read to gain insight into why that might be the case. In his thought provoking book, Adner explains how most innovation initiatives focus solely on managing the "execution" risk i.e. ensuring that a valid customer need exists, vetting the idea, and ensuring appropriate leadership and implementation. Adner explains that this "narrow lens" view is a root cause of why these innovators are blind sighted by failure. A "wide lens" view reveals two other major risks that need to be mitigated for success:

Co-innovation Risk - This risk represents the extent to which the successful commercialization of an innovation depends on the successful commercialization of other innovations.

Adoption Chain Risk - This risk represents the extent to which partners and others will need to adopt the innovation before the end customer can reap the full benefit of the value proposition.

Adner illustrates these risks very clearly in explaining how Michelin’s big innovation in tires - the PAX System, which was designed to run for 125 miles after a blowout - failed to take off, despite the backing of major automakers, because the company failed to foresee the need for a robust network of service centers to repair these run-flat tires before going to market. The inability to service PAX tires and the resulting additional expenses incurred by consumers who had to buy new tires led to mass consumer backlash and even lawsuits that ultimately turned automakers off of these truly innovative tires. The PAX system falied because Michelin had failed to mitigate the adoption chain risk.

As Adner explains, co-innovation and adoption chain risks lurk in the blind spots of traditional strategy. They remain dormant as long as an innovation follows established lines (such as Michelin's successful introduction of Radial tires in the 1946). However, as soon as an innovation goes beyond being incremental in nature (such as the PAX tires), ecosystem challenges arise, which can only be addressed with a wide angle lens.

History is replete with examples of innovation failures that occurred despite brilliant execution. Nokia spent millions to be first to market with a 3G handset, but failed to profit because critical partners in its ecosystem did not complete their innovations in time. By the time customized video streaming, location based services, and automated payment systems were finally ready, so was the competition. Phillips suffered a similar fate as it tried to introduce HDTVs in the 1980s. And we are observing a similar dynamic with 3D TVs today. All of these are examples of failures stemming from the lack of "co-innovations" that need to happen for consumers to be able to realize the full benefits of an innovation's value proposition.

The Michelin story above illustrated an innovation's failure due to non adoption by a critical player in the ecosystem. Pfizer’s suffered a similar disastrous fate with its miraculous inhalable insulin, Exubera, which was approved by the FDA, hailed by Wall Street analysts, and launched with huge fanfare. The $2.8 billion write-off, widely acknowledged as one of the biggest failures in the history of the pharmaceutical industry, can be traced directly to endocrinologists not embracing the requirement of lung function testing imposed by the FDA.

Contrast the above examples of failure with two innovations that have been successful. Digital Cinema Initiative (DCI) is an example of a consortium of movie studios coming together in a unique way to overcome the cost of adopting digital film within the theater value chain. In essence, they subsidized and shared the cost of capital investment in smaller theater chains to ensure that digital film would enjoy the broad distribution and availability critical to its growth. It was a direct result of this innovation that director James Cameron was able to regale us with his 2009 blockbuster movie "Avatar". Amazon's success in the e-reader market with its Kindle product is also an example where Amazon overcame publisher reluctance by subsidizing their participation in addition to robust digital rights management both of which Sony was unable to accomplish and therefore failed despite having a technically superior e-reader.

Finally, Adner provides insight into a topic that is near and dear to my heart - "The First Mover Advantage." In my recent book, Living in the Innovation Age, I talk about the fallacy of thinking that "only the first to market" reaps the benefits of innovation. Rather, there are many cases of second, third, and subsequent movers being successful where the first mover failed. Adner sheds further light on this matter by presenting a framework that one can use to determine whether they should even try to be the "first mover". Per this framework, it only pays to be the first mover if your innovation has very little dependency on the ecosystem. The more complex your innovation becomes and the more it depends on co-innovations and adoption, the less beneficial it is to be a first mover (i.e. the risk of moving first goes up significantly). In such cases, it is much more prudent to be a smart mover as Amazon was with its Kindle and Apple was with its iPod.

The Bottom Line

I highly recommend The Wide Lens to anyone involved in innovation strategies, commercialization and new business development. Its unique approach to analyzing that factors that contribute to the success and failure of complex innovations and the supporting tools (value blueprints, leadership prism, first mover matrix, supply chain reconfiguration levers, and minimum value footprint) are sure to, as Adner summarizes in his last chapter, "multiply your odds of success."

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About Tarak

Tarak is a highly experienced, results-oriented, business leader, skilled enterprise architect, and published thought leader. He has demonstrated the ability to lead diverse teams of professionals in achieving mission critical results in a variety of highly competitive industries, cutting-edge markets, and fast-paced environments. His broad professional background and excellent education provides a solid foundation to his ability in solving challenging business problems with innovative enterprise solutions that leverage and align IT capabilities with evolving business needs.
As a testament to his thought leadership, he has authored Living in the Innovation Age and co-authored Professional Java Web Services. He has also published over 80 articles on Innovation, IT Transformation, and Enterprise Architecture.